By Kate Yuan

(JW Insights) May 12 -- China's leading foundry SMIC reported $1.4623 billion revenue in the first quarter of 2023, a 9.8% drop from the previous quarter, with a gross margin of 20.8%, according to its financial report released on May 11. SMIC attributed the drop to weak demand and a decrease in capacity utilization.

In the first quarter, SMIC’s revenue from smartphones, IoT, and consumer electronics accounted for 23.5%, 16.6%, and 26.7% respectively. Its monthly production capacity increased from 714,000 pieces of 8-inch wafers in Q4 2022 to 732,250 pieces in Q1 2023, with a utilization rate of 68.1%.

SMIC’s revenue was primarily generated from China, taking up 75.5% of the total revenue. The proportion of revenue from the US reached 19.6% while that from Europe and Asia was only 4.9%.

The company expects both capacity utilization and shipments in Q2 to be higher than in Q1, with projected revenue growth of 5% to 7% compared to the previous quarter. However, the average wafer price is expected to decrease due to changes in product mix. The gross margin may be between 19% and 21%.

SMIC’s forecast for 2023 remains unchanged, which is a low double-digit decline in revenue over the previous year with a gross margin of around 20%. The company stated that the extent of the recovery in the second half of the year is still uncertain and the market has not yet fully recovered, although Q2 revenue is expected to rebound from a low point.

Currently, SMIC's Shenzhen fab (SMIC Shenzhen中芯深圳) is in mass production, and its new Beijing fab (中芯京城) is expected to enter mass production in the second half of the year. The new Shanghai fab (中芯东方) is projected to run by the end of the year while the Tianjin fab (中芯西青) is still under construction, said the company.